News Release Details

• Reports first quarter sales of $634 million, down 24 percent year-over-year. Effectively executing against restructuring actions as all events on or ahead of schedule.
• Updates full year EPS guidance to exceed $1.40 on full year sales outlook of down approximately 20 percent.
• Full year free cash flow expected to be at least $225 million as company is $45 million ahead of 2008 levels exiting first quarter.

All financial information and period-to-period references are on a continuing operations basis unless otherwise noted. Reconciliations to discontinued operations as well as GAAP and Non-GAAP reconciliations are in the attached financial tables.

MINNEAPOLIS--(BUSINESS WIRE)--Apr. 21, 2009-- Pentair, Inc. (NYSE:PNR) today announced first quarter 2009 net earnings per diluted share from continuing operations (EPS) of $0.18. This represents a decrease of 66 percent as compared to the $0.53 of EPS in the first quarter last year. Current period results include a negative $0.02 per share impact from restructuring charges taken late in the quarter related to additional headcount reductions. Adjusting for these items, first quarter 2009 EPS was $0.20, which met the low end of the company’s guidance range.

Total company sales decreased 24 percent to $634 million, compared with $830 million in the first quarter of 2008. The company delivered first quarter operating income of $37 million. On an adjusted basis, the company delivered operating income of $40 million versus $97 million in the year-ago quarter. The company’s adjusted operating income excludes the impact of additional severance charges associated with the first quarter elimination of 340 positions not included in prior restructuring. Overall, adjusted operating margins for the first quarter contracted 540 basis points to 6.3 percent. The positive impact from productivity and price could not offset the significant negative impact related to lower volumes.

Total company free cash flow was a usage of $33 million for the quarter versus a usage of $78 million for the year-earlier quarter. The company said it remains on track to achieve free cash flow greater than $225 million for 2009, driven by improvements in working capital.

“Most of our major markets were dismal throughout the first quarter as many of our customers retrenched in reaction to the global recession. Fortunately, our execution against our aggressive cost reduction plans is yielding solid benefits. We delivered first quarter adjusted EPS of 20 cents, which matched the low-end of our guidance range, in spite of sales declining 24 percent which was ten percentage points worse than our sales outlook,” said Randall J. Hogan, Pentair chairman and chief executive officer.

First Quarter Business Highlights

The Water Group delivered $424 million in sales, a 22 percent decline year-over-year. Sales were down 21 percent excluding the formation of the Pentair Residential Filtration (PRF) business with General Electric’s (GE) Water and Process Technologies unit, which added three points of growth, and foreign exchange, which reduced sales by four points.

• Global Flow Technologies sales were down 18 percent versus the year-ago quarter, as sales increases of pump equipment for global commercial markets did not outpace declines in residential and agricultural markets.
• Global Filtration sales were down 8 percent, or down 19 percent excluding the increased sales associated with the formation of PRF. Sales increases in desalination markets did not offset declines in residential, industrial and foodservice markets.
• Global Pool and Spa sales were down 45 percent as the prolonged decline in North American residential pool and spa markets continued to impact sales.
• International Water sales declined over 20 percent as growth in Asia-Pacific did not outpace organic sales declines of 23 percent in Europe, Middle East and Africa.

The Water Group’s first quarter reported operating income totaled $27 million, down 59 percent as compared to $65 million in the same period last year. In the quarter, the Water Group had $1 million in pre-tax restructuring charges associated with severance from recently announced headcount reductions. Excluding these items, adjusted operating income was $28 million, down 56 percent versus $65 million a year ago. Adjusted operating margins of 6.7 percent were down 520 basis points as benefits from productivity and price did not offset the negative impact from volume declines, inflation, pay-as-you-go restructuring costs, and integration expenses associated with the formation of PRF with GE.

Technical Products delivered first quarter 2009 sales of $210 million, a decrease of 26 percent versus the year-earlier period. Sales were down 24 percent excluding the impact of foreign exchange.

• Global Electrical sales were down 25 percent as global industrial markets dramatically slowed their capital projects and distributors aggressively reduced inventory levels.
• Global Electronic sales were down 27 percent. In Asia, electronic sales were down 3 percent while sales in Europe were down 15 percent in local currencies, and North American sales were down 32 percent.

Technical Products’ first quarter reported operating income totaled $20 million, down 55 percent compared to $45 million in the same quarter last year. Adjusting for a restructuring charge, operating income was $21 million. Adjusted operating margins were 10.1 percent, down 580 basis points versus the first quarter 2008. In the quarter, the benefits from productivity and price did not offset the negative impact from volume declines, inflation and foreign exchange.

“Clearly, we are wrestling with a worse than expected global economic downturn that has had a dramatic impact on us and most of our markets. First quarter sales were much lower than expected and it is prudent we plan for a challenging sales environment for the balance of 2009,” Hogan said. “However, the tremendous progress we are making to reduce fixed and variable cost is encouraging. We believe that this progress, coupled with our focus to generate solid free cash flow, positions the company for significant upside once markets stabilize and then improve.”

Outlook

The company introduces its second quarter reported 2009 EPS guidance range of $0.32 to $0.42. Adjusting for charges associated with the recently announced early redemption of its bonds, second quarter EPS is expected to be $0.35 to $0.45, down approximately 43 percent year-over-year when using the midpoint of the guidance range. Second quarter sales are expected to be down over 20 percent.

The company updates its full year 2009 EPS guidance to equal or to exceed $1.40, which would be down 46 percent when compared to reported full year 2008 EPS or down 36 percent when 2008 EPS is adjusted for non-recurring items (see attached 2008 reconciliation table). The company expects full year 2009 EPS on both a reported and adjusted basis will be comparable as restructuring and other charges in 2009 are expected to be similar in size to anticipated gains from other nonrecurring items.

“Many markets are faring much worse than the sober outlook planned upon and our updated guidance reflects this,” said Hogan. “We now expect the next few quarters will demonstrate only modest seasonal benefits and that sales will be down over 20 percent for 2009. Our full year EPS guidance of at least $1.40 provides investors with a foundation which we believe will be achieved or exceeded through continued solid execution despite these unprecedented times.”

“Further, we believe our first quarter earnings – and the sales decline that drove it – represents a low-point for the company. While it is clearly too early to forecast 2010, the benefits we expect to receive from our productivity and cost actions and cash flow generation position us well to grow earnings when markets stabilize,” Hogan added.

Earnings Conference Call

Pentair Chairman and CEO Randall J. Hogan and Chief Financial Officer John L. Stauch will discuss the company’s performance and second quarter and full year 2009 guidance on a two-way conference call with investors and a live audio webcast at 12:00 p.m. Eastern today. Reconciliation of non-GAAP financial measures are set forth in the attachments to this first quarter 2009 earnings release and in the first quarter 2009 earning release conference call presentation, both of which can be found at Pentair’s web site (www.pentair.com). Related financial charts and certain other information to be discussed on the conference call will be available on the company’s website shortly before the conference call. The web cast and presentation will be archived at the same site following the conclusion of the conference call.

Caution Concerning Forward-Looking Statements

Any statements made about the company’s anticipated financial results are forward-looking statements subject to risks and uncertainties such as the breadth and severity of the global economic downturn; the strength of housing and related markets; the ability to implement our restructuring and other cost reduction plans successfully and the risk that expected benefits may not be fully realized or may take longer to realize than expected; foreign currency effects; retail and industrial demand; product introductions; and pricing and other competitive pressures, as well as other risk factors set forth in our SEC filings. Forward-looking statements included herein are made as of the date hereof, and the company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results.

About Pentair, Inc.

Pentair (www.pentair.com) is a diversified operating company headquartered in Minnesota. Its Water Group is a global leader in providing innovative products and systems used worldwide in the movement, treatment, storage and enjoyment of water. Pentair’s Technical Products Group is a leader in the global enclosures and thermal management markets, designing and manufacturing thermal management products and standard, modified, and custom enclosures that house and protect sensitive electronics and electrical components. With 2008 revenues of $3.35 billion, Pentair employs approximately 13,400 people worldwide.

Source: Pentair, Inc.

Pentair, Inc.
Todd Gleason, 763-656-5570
Vice President, Strategic Planning & Investor Relations
todd.gleason@pentair.com